Convergence of WTO Dispute Settlement and Investor-State Arbitration: A Closer Look at Umbrella Clauses

By Li, Siqing | Chicago Journal of International Law, Summer 2018 | Go to article overview

Convergence of WTO Dispute Settlement and Investor-State Arbitration: A Closer Look at Umbrella Clauses


Li, Siqing, Chicago Journal of International Law


Table of Contents

I. Introduction....................191

II. The WTO's Exclusive and Compulsory Jurisdiction Over WTO Claims.... 196

A. Applying Article 23 to Investor-State Disputes....................199

B. Article 23 May Prevent a Private Investor from Bringing WTO Claims at an Arbitral Tribunal....................202

1. Article 23.1....................202

2. Article 23.2....................203

C. Contracting out of Article 23....................204

III. The Origin and Text of Umbrella Clauses....................207

A. The Origins of the Umbrella Clause....................207

B. The Wording of Umbrella Clauses....................210

IV. Jurisprudence on Umbrella Clauses....................213

A. Contract Claims....................213

1. SGS v. Pakistan....................213

2. SGS v. Philippines....................215

3. Subsequent Cases....................217

4. Forum Selection Clause....................218

B. Privity of Contract....................220

1. Burlington v. Ecuador....................220

2. SyC v. Costa Rica....................222

3. Analogy to WTO Claims....................224

C. General Legislation....................225

1. Enron v. Argentina....................225

2. Philip Morris Asia v. Uruguay....................226

3. Application to WTO Claims....................228

V. Proposals....................229

A. Manifesting Parties' Intentions in the Language of the Umbrella Clause 229

B. Clarification by the WTO....................230

VI. Conclusion....................231

I. INTRODUCTION

The boom of international organizations and agreements over the last century has led to die proliferation of international dispute settlement mechanisms.1 These mechanisms have developed separately in different regions and have diverse historical and functional features.2 However, the issues that these dispute settlement rules govern are not always clearly distinct.3 Multiple forums can decide that they have jurisdiction, even exclusive jurisdiction, over the same dispute.4 For example, the North American Free Trade Agreement (NAFTA) allows parties to choose either the WTO or the NAFTA forum to address issues arising under both the 1994 General Agreements on Tariffs and Trade (GATT) and NAFTA.5 Yet once a party chooses to initiate proceedings at the NAFTA forum, the NAFTA forum needs to be exclusive.6

However, Article 23 of the WTO's Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) provides that WTO has exclusive jurisdiction over disputes arising under the SPS Agreement.7 Sometimes parties choose a mechanism ex ante by agreements when a conflict of jurisdictions exists, but most of the time they do not.8 Thus, the overlapping jurisdictions of different mechanisms and the lack of hierarchy among them have led to inconsistent interpretations over the same factual and legal issues.9 This phenomenon is recognized as a part of the fragmentation of international law.1"

The fragmentation of international dispute setdement has led to inconsistent interpretations by different dispute resolution forums. The different interpretations of the national treatment principle11 by the WTO and various arbitral tribunals established under bilateral investment treaties (BITs) illustrate this trend.12 While the WTO, for example, has held that an impact on the competitive conditions between domestic and imported products breaches the national treatment principle, some tribunals have found that insufficient for demonstrating a violation of the national treatment.13 Consequently, parties are confused as to which precedent to follow.14

Further, BITs usually contain substantive rights and obligations parallel to some of the WTO agreements while subjecting all disputes arising under the BITs to arbitral tribunals rather than the WTO. …

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